This edition captures key developments and insights shaping arbitration practice as we step into the summer of 2025. Here is a snippet of the judgments in April 2025. Stay informed, stay ahead – Happy reading!
Domestic Highlights
- In a significant policy shift, the Public Works Department of Government of NCT of Delhi has directed deletion of arbitration clause from future contracts with effect from 21.04.2025
- The Securities and Exchange Board of India (SEBI) in a step towards widening Online Dispute Resolution (ODR), has proposed mandatory inclusion of arbitration clauses in all financial claims of more than Rs. 10 crore and claims of chronic or repetitive nature.
Rendezvous – Indian Courts and Arbitration
Limited power under Section 34 allows the court to vary or modify / severe arbitral awards – Gayatri Balasamy v. ISG Novasoft Technologies [2025 SCC OnLine SC 986]
The Supreme Court has hit reset on powers of courts under Section 34 and 37 of the Arbitration and Conciliation Act, 1996 (“1996 Act”). In a 4:1 majority ruling, the Supreme Court has held that courts have powers to severe awards and limited powers to modify. The judgment acknowledges that Section 34 of the 1996 Act does not expressly grant courts the power to modify arbitral awards. The Supreme Court has, however, relied on the doctrine of omne majus continet in se minus — the greater power includes the lesser.
The power to modify is restricted in nature and does not permit re-examination of the merits of dispute, but is restricted to modification of clerical, typographical, or computational errors and excess post award interest. The judgment also concludes that courts’ powers to modify awards do not contravene the New York Convention, 1958.
So far as court’s power of remand under Section 34(4) of the 1996 Act are concerned, the Supreme Court disagreed with the ruling of Kinnari Mullick and Another v. Ghanshyam Das Damani and held that a request for remand can be made orally by any of the parties and can be allowed later by Section 37 court as well.
Justice K.V. Viswanathan, in dissent, reasoned that under Section 34 of the 1996 Act, courts only have powers to set aside an award and not to modify it. The power to set aside is fundamentally different from the power to modify and the 1996 Act provides no basis for reading one into the other. He further held that Project Director NHAI v. M. Hakeem (2021)9 SCC 1 is not per incuriam as it held that a Section 34 Court cannot modify the award. However, relying on the principle of actus curiae neninem gravabit i.e. act of Court shall prejudice no one, he held that the Court may correct clerical or similar minor errors in the award.
Powers of an arbitral tribunal stem from the arbitration agreement and not through Sections 11 and 21 of the 1996 Act – Adavya Projects v. Vishal Structurals [2025 SCC OnLine SC 806]
The Supreme Court while granting leave in an appeal against the order of a Section 37 Court, has clarified that: (i) non – service of a Section 21 notice on a person does not preclude their impleadment in arbitration proceedings; (ii) purpose of Section 11 is simply the constitution of tribunal and the order appointing the arbitrator does not limit the arbitral tribunal’s terms of reference or scope of jurisdiction; and (iii) the tribunal’s jurisdiction stems from consent, so a Section 16 inquiry focuses on whether the person is a party to the arbitration agreement. The present judgment was passed in the backdrop of an arbitral tribunal refusing to implead certain parties merely because they were not issued a Section 21 notice nor were they a part of Section 11 proceedings.
Application filed on the next working day after the court holiday falls within limitation – R.K. Transport v. Bharat Aluminum Co. (Balco) [2025 SCC OnLine SC 717]
The Supreme Court has held that a Section 34 is not time-barred if the limitation period lapsed on a court holiday and the petition was filed on the next working day of the court. In the instant matter, the impugned award was received on 09.04.2022 and the prescribed period of 3 months lapsed on 09.07.2022 which was a declared court holiday. Since the Section 34 objections were filed on 11.07.2022 i.e. the next court working day, the court relied on the judgement of My Preferred Transformation & Hospitality v. Faridabad Implements2025 SCC OnLine SC 70 and stated that the benefit of Section 4 of the Limitation Act will inure to the benefit of the respondent. Consequently, the Court ruled that there is no delay in the filing of the section 34 objections.
No 18% default interest if arbitration began before 2015 and award specifics interest – C.I.S.C.-S.R.S.C. (Joint Venture) v. Central Coalfields [C.M.P. No. 1064 of 2022]
The High Court of Jharkhand has held that interest at the default rate of 18% under the unamended Section 31 (7) (b) of the 1996 Act cannot be claimed if the arbitration was initiated before the 2015 amendment and the parties didn’t agree to apply the amended provision. The Hon’ble Court held that only the interest specified in the award is payable, and the default rate applies only if the award is silent on interest. In the instant case, the arbitrator’s award only directed payment of interest at “prevalent rates,” which the court interpreted as the “current rate of interest” and not a fixed 18% rate, since the award did not clarify the exact rate. The Court upheld the Commercial Court’s view stating that the petitioner is only entitled to the interest expressly awarded in the arbitration, not the default 18%.
Principal Commercial Courts cannot extend mandate of arbitral tribunals, if the appointment of tribunal was done by the high court – Smt. Somuri Ravli v. Somuri Purnachandra Rao [Civil Revision Petition No. 739 of 2025]
Following the jurisprudence flowing from the Delhi, Bombay and Calcutta High Courts, the Telangana High Court has held that Sections 2(1) (e) and 29A of the 1996 Act are hierarchy sensitive for the purposes of deciding the orders of courts for deciding issues of appointment, termination of arbitrators and extension of their mandate. In the case at hand, the High Court held that as the original order appointing the arbitrator was passed by the High Court, the parties cannot approach principal civil courts in a district for extension of the mandate. The High Court however, recognized that principal civil court having original jurisdiction in a district is authorized to make such decisions in consensual appointments between the parties.
Successor of merger may invoke arbitration when all rights and liabilities are transferred – Tata Capital Limited v. Krishna Kant Tiwari [AP – COM No. 1035 of 2024]
The High Court of Calcutta referred the parties to an arbitration in a petition filed by a non – signatory to the loan agreement. The non-signatory had was the resultant entity following a merger and amalgamation process where the original lender Tata Capital Finances Ltd. merged with Tata Capital Ltd. to form a new entity. It was pointed out to the court that pursuant to this merger, all properties, assets, rights, liabilities, benefits, duties, contracts and etc. stood transferred to the Petitioner. The court relied on the Supreme Court judgement of Cox & Kings v. SAP (India) (P) Ltd. (2025) 1 SCC 611, which stated that the joinder of non – signatory parties depends on (i) when a signatory party seeks joinder of non – signatory party; and (ii) when a non – signatory party seeks joinder to an arbitration agreement.
Disclaimer
The content provided in this newsletter is intended for general awareness and should not be considered as legal advice. Readers are advised to consult with a qualified legal professional regarding any specific issues mentioned herein. If you have any questions about any of these developments or would like to see something different next month, reach out to us at knowledge@sarthaklaw.com.